Once-torrid housing market cools
By Jeff Ostrowski
Palm Beach Post Staff Writer
Sunday, February 12, 2006
Four months after putting their Wellington home on the market and cutting the price $40,000, John and Mary Porter are still waiting for an offer.
The couple moved to Los Angeles in October, and they figured their three-bedroom house would sell quickly. After all, the ranch-style home boasts a manicured lawn and a renovated kitchen with granite counters and a beer tap — and it's in Palm Beach County, which just a year ago hosted one of the nation's top housing markets.
But the Porters listed their home for sale precisely as the inevitable slowdown arrived.
Real estate agents and home sellers throughout the county describe a dramatic shift from what only six months ago was a strong seller's market. There's no crash yet — sale prices have flattened rather than plummeted — but there's plenty of evidence the five-year boom has peaked.
The chill came quickly. Just last year, torrid price spikes made Palm Beach County the nation's third-hottest housing market, according to the National Association of Realtors. Prices here jumped 35.9 percent from early 2004 to early 2005. The typical home's value rose at a rate of nearly $1,900 a week.
Amid the frenzy, sellers enjoyed bidding wars and full-price offers. Today they're waiting for months and watching the "for sale" signs multiply in their neighborhoods as buyers take a breather.
The change is an eye-opening one for sellers such as the Porters. They could use the cash that's tied up in their Wellington house.
"It's tough," John Porter said last week from his new job in California. "My mortgage there is $2,000, and my rent here is $2,350, so we're not doing much but working and paying the mortgage."
The Porters initially asked $409,000 for their house at 627 Carnation Court, but they've cut the price to $369,000, said their real estate agent, Randy Bianchi of Paradise Properties in West Palm Beach. The Porters paid $279,000 for the house in 2004.
"They have a beautiful home," Bianchi said. "It's just a tragedy of timing."
Indeed, it seems as though everyone decided to sell at once. The number of homes for sale in Palm Beach County nearly tripled in the past two years, from about 7,800 two years ago to more than 20,000 today.
Any economist will tell you that a spike in supply is bad news for prices.
Of course, the rising inventory of homes is good news for buyers, who are enjoying some newfound bargaining room.
Robert Trinchet moved to Wellington from the Cleveland area last year after a job transfer. He decided to rent rather than wade into a market that was awash in what he calls "senseless euphoria."
Trinchet has been trolling for a deal on the Web site of Homekeys, a Miami real estate firm, and he has noticed a number of sellers reining in their list prices.
"What I've seen is pretty encouraging," Trinchet said. "A lot of the same homes we were looking at in September are still on the market."
Trinchet said he has a contract on a Wellington home for 17 percent below the asking price. He would not offer further details for fear of nixing the deal.
Buyers bargaining harder
Indeed, the slowdown is spurring a backlash from once-beleaguered buyers, who suddenly feel free to drive hard bargains, said Mike Dooley, a broker at Illustrated Properties in Hobe Sound and president of the Florida Association of Realtors.
"We're seeing buyers coming in and making very low offers," Dooley said. "That's just evidence of the pendulum swing."
Sellers simply roll their eyes at low-ball offers, Dooley said. But buyers suddenly have more choices, and now they enjoy the luxury of making a discounted bid without the fear of losing out to another buyer.
The spread of buyers' revenge is bad news for sellers such as Brian Williams. The marriage counselor and his wife put their Lake Worth home on the market in September.
The house at 821 N. Lakeside Drive was built in 1925. It offers historic charm and a location near the Intracoastal Waterway. Williams has not lowered his $496,000 asking price, even though offers have been scarce.
"I'm disappointed that there isn't more traffic," he said. "I'd consider reducing the price if houses started selling in the area at lower prices, and if people were making offers that were lower. But I haven't seen any evidence that it's about prices yet."
Meantime, Williams cannot miss the telltale signs of a cooling market: "For sale" signs are multiplying in his neighborhood.
"There seems to be 5,000 homes for sale on Lakeside," Williams said, "and nothing's selling, so that's a little frustrating."
A couple of blocks away, Sharon Gorman is asking $369,000 for her home. That once was a price guaranteed to attract offers, but the house has languished on the market for three months.
"The market is full of houses right now," Gorman said. "It looks like half the county is for sale."
Unlike the Porters, neither Williams nor Gorman are especially motivated. Both said that if they sell, they'll buy homes elsewhere in Palm Beach County.
Their agent, Bo Allen of The Pier Group in Lake Worth, said sellers need to get used to a new reality. The days of aggressive pricing, eager buyers and house-hungry speculators are over.
"You've got a lot of investors starting to bail out," Allen said. "And you've got all these talking heads on TV telling people the market's going to crash."
Jobs, beaches still enticing
Which begs the question: Will prices plunge, or is this slowdown just a return to normalcy?
Some economists warn that Palm Beach County's rapid run-up in prices makes the market ripe for a fall.
For instance, National City Corp. of Cleveland says Palm Beach County homes are overpriced by 57 percent, while Treasure Coast houses are inflated by 72 percent. To calculate those figures, the financial services firm compared home prices with incomes.
Others say the slowdown will lead to a soft landing rather than a crash. The National Association of Realtors last week predicted that the number of sales nationwide will dip slightly in 2006 from last year's record, while price appreciation will slow to 5 percent from last year's 12.7 percent.
Besides Palm Beach County and the Treasure Coast, the housing market is cooling statewide and nationally. Realtors in other once-hot markets such as California and Washington, D.C. report a growing inventory of homes and more restrained buyers.
Ellen Bitton, owner of Park Avenue Mortgage Group in Palm Beach, said Palm Beach County property prices will be propped up by an influx of retirees and new residents drawn by sandy beaches and a strong job market.
"There are still people who want to live in Palm Beach County," Bitton said.
How quickly those new arrivals will snap up the glut of homes and condominiums is another matter.
"It is a little disconcerting to drive down some of these streets and see every other house for sale," said Brad Westover, owner of American Harbour Realty in Jupiter.
Even if there's no crash, area sellers will have to get used to the idea that their homes are not the gold mines they once were. Westover said one of his clients recently accepted $650,000 for a home listed for $750,000.
"If she had not run with that offer, in all likelihood she'd still be sitting there with that property," Westover said. "For the first time in five years, people are actually taking a breath, instead of just buying."
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